PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 20:20 GMT, Tuesday, 28th Jan 2014, by Agrimoney.com
Evening markets: currency calm helps coffee, sugar recover

The sell-off in emerging market currencies halted, and with that, fortunes improved for the soft commodities which tumbled in the last session on fears for the Brazilian real.

In fact, fears over the Argentine peso's tumble being repeated by other developing market currencies, but particularly the real, have not gone away.

"The prospects for Argentina according to the financial press are dire, with predicted prolonged domestic inflationary issues and possible default," said Tom Kujawa, co-head of the softs department at Sucden Financial.

In sugar, "with the 'contagion' effects towards particularly the Brazilian, Indian, Thai and Australian currencies, the winds are firmly to the backs of the bears," he added.

"In summary it's incredibly difficult to be a sugar bull at present even with fresh 3.5-4-year lows seemingly printed on a daily basis."

Stronger closes

Still, with the Bank of India raising interest rates by 25 basis points to 8%, Turkey expected to unveil a rate increase and Brazil's central bank forecasting rate rises across emerging markets, developing country currencies held their ground for now, and even rebounded a touch.

That helped the likes of arabica coffee and raw sugar, of which Brazil is the top producer and exporter, recover. A weaker real boosts the value in dollars of assets in which Brazil is a big player, encouraging producer selling.

Arabica coffee for March added 0.7% to 114.65 cents a pound.

Raw sugar for March rebounded 1.5% to 15.02 cents a pound, if only after setting a fresh three-year low for a spot contract of 14.70 cents a pound.

The rebound did not extend, however, to orange juice, another ag dependent largely on Brazil for supplies, which for March ended down 0.4% at 138.70 cents a pound.

French wheat overlooked

Among grains, wheat had a mixed performance closing up 0.4% at $5.66 a bushel in Chicago for March delivery, but down 0.8% at E192.75 a tonne in Paris. And not for currency reasons.

The divide reflected the differing fortunes of French and US wheat in the latest tender by Egypt's Gasc grain authority, which took its purchases of the grain this month above 1m tonnes, as it exploits lower prices.

Purchases of 240,000 tonnes on Tuesday included 60,000 tonnes of US wheat, despite the extra transport costs of shipping across the Atlantic rather than from the Black Sea or France.

However, French wheat did not make the cut, with Gasc tightening restrictions on wheat with a moisture content of more than 13.0%, catching out French supplies, which tend to have 13.5% or so.

'Increased winterkill protection'

The prospect of French wheat missing out on future Gasc tenders was one reason for price weakness in Paris.

Another was that Gasc bought the bulk of its purchase from Russia, stoking ideas that the provider of competitively priced supplies, on the European Unions doorstep, might have some more shots left in its locker, rather than being largely sold out of export markets, as many felt late last year.

Furthermore, the threat of winterkill in Ukraine and the Northern Caucasus receded with snowfalls.

"This will further increase winterkill protection for wheat, as very cold temperatures continue across the region over the next 10 days," MDA said.

'Temperatures are quite cold'

But there are still worries about how US winter wheat seedlings are coping with frost.

"Temperatures are quite cold across the Midwest and north eastern Plains this morning, and some winterkill is indeed occurring across west central Indiana, central Illinois, northern Missouri and far eastern Nebraska as snow cover remains very limited," MDA said.

Signally, Chicago soft red winter wheat, grown largely in the Midwest, outperformed Kansas City-traded hard red winter wheat, popular in the central and southern Plains.

Kansas wheat for March eased 0.25 cents to $6.22 a bushel.

'Tremendously cold weather'

The cold is helping nearby corn prices too, in hampering logistics, at a time when producers are anyway reluctant to sell.

"Tremendously cold weather across the Midwest continues to support corn prices," CHS Hedging said.

And ethanol soared, up 2.9% at $1.768 a gallon for March delivery, helping support ideas of solid demand from biofuel producers, after data on Friday showing feedlots a little more willing to put cattle on feed than investors had expected.

The US Department of Agriculture also announced the sale of 100,000 tonnes of US corn to Spain for 2013-14, underlining ideas of resilient US export demand.

Chicago corn for March closed up 0.1% at $4.32 a bushel making Tuesday the sixth successive winning day for the grain.

Improved Argentine conditions

For soybeans, weather was less bullish, with ideas of rainfall and lower temperatures in Argentine going some way to ease crop concerns.

"The weather conditions in South America have taken a back seat because there is little to talk about as the wetter and cooler conditions in Argentina the last two weeks have taken much of the uncertainty out of the market.

CHS Hedging said: "Dry weather is forecasted for Mato Grasso, Brazil later this week which will aid soybean harvest."

'Rumours of China cancellations'

Technically, futures remained compromised too.

"A move above $13.00 a bushel would be a bullish sign, but traders are hesitant to push prices higher as rumours of China cancellations continue to be a concern," said US Commodities, the cancellations being of orders of US soybeans, now that cheaper Brazilian supplies are coming online.

Soybeans for March closed down 0.2% at $12.85 a bushel, staying above their 200-day moving averages, but struggling to get near that $13-a-bushel mark.

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